In a landmark move, Kerala Infrastructure Investment Fund Board (KIIFB), a state government undertaking on Friday said that it raised Rs 2,150 crore through masala bonds.
With this, Kerala became the first state in the country to gain resource through the masala bonds.
“This is a landmark International Debt Capital Markets transaction as this is not just the first offshore capital market issuance from a State level entity from India ever, but also the largest dual currency issue by a sub-sovereign backed entity from the entire Emerging Markets and Asia,” KIIFB said in a press statement.
Finance Minister Dr Thomas Isaac had relied on KIIFB for most of the budget plans on infrastructure development. The Opposition had raised strong criticism saying the plan is not practical. KIIFB was initiated by E K Nayanar government in 1999 but became active only during this regime.
“I hope at least now the Opposition leader will agree that KIIFB will work,” said Isaac in a Facebook post.
Masala bonds are bonds issued outside India but denominated in Indian Rupees, rather than the local currency. The KIIFB bonds were listed in Singapore and London stock exchanges. The move is significant as only large Indian corporate and public institutions like NHAI and NPTC which are rated AAA in the domestic market were able to gain resource through this mode.
The transaction was priced on March 26, 2019, and saw strong participation from a wide spectrum of investors which included asset managers, insurance companies pension funds, banks as well as private wealth managers, the statement reads.
The state plans to repay the debt through controlled leverage for which state earmarked a share of fuel and vehicle taxes.
“This has also helped to showcase the unique strengths of Kerala in front of a wider global audience and help garner international investments to the state. This is a milestone transaction for Kerala Infrastructure Investment Fund Board and for the State of Kerala,” KIIFB CEO Dr K M Abraham said.
Key takeaways from KIIFB:
The government approved projects of Rs 28287.81 crores so far.
Rs 14275.17 crores for development of basic industrial infrastructure.
Roads, flyovers, school buildings, and hospital buildings are among the projects approved under KIIFB. This is beyond the flagship projects of Pinarayi government, the hill-highway, seashore highway and water highway.